Gate 2 winners and losers: why grid reform must deliver a just transition

• 8 hours ago (2026-04-02)
• Junior Isles

Decentralised energy 7 Transmission 236

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Simon Reilly, Chief Executive of Aurora Utilities

Britain’s energy transition hinges on an unglamorous but critical task: connecting new projects to an over‑stretched electricity grid.

The National Energy System Operator’s (NESO’s) Gate 2 reform was designed to clear the queue. The idea was that it would replace “first‑come” with “first‑ready” and scrub “zombie” projects. There are billions in investment ready to be deployed. However, the reform is at risk of creating a two‑tier system in which only deep‑pocketed players can compete, risking locking small developers and communities out of the energy transition.

Billions are ready, but confidence is fragile

In late 2025, we surveyed 800 senior infrastructure leaders across investment funds, independent connection providers, renewables developers and property developers. The results are striking. Almost every respondent (98%) has capital committed to projects that will need a grid connection by 2026; six in ten have earmarked between £50 million and £250 million over the next two years. Nearly three quarters (74%) believe NESO’s Gate 2 process could reduce connection delays, and two‑thirds (68%) view the reform as a positive investment opportunity.

This optimism is tempered by caution, however. Almost half of respondents (46%) fear the reforms will favour the larger players, potentially squeezing out smaller developers – those with less capital, smaller headcounts or less experience. High connection or upgrade costs would make 44% of respondents decide not to build a project or surrender their connection; 41% point to land‑rights hurdles and 40% cite planning approval delays. Delays can be devastating, for example, a 12‑month connection delay can inflate project costs by up to 30%, which in reality might add tens of millions of pounds to a development.

Such sentiments underscore how much rests on how NESO and Ofgem execute the reforms in 2026.

What Gate 2 changes, and whom it helps

Under Gate 2, the grid queue is reordered according to readiness rather than arrival date. NESO assesses projects on land rights, planning permission, financing and deliverability. Projects meeting the criteria move to the front and receive firm (non‑indicative) offers, while others are demoted or removed.

Developers who have progressed through Gate 2 can start planning and ramp up or slow down development depending on where they sit in the queue. Yet funding cannot be secured until they receive formal connection offers, and those offers have been delayed.

While developers now know roughly where they sit in the queue, delays in issuing firm connection offers mean funding remains on hold. And, as of early February 2026, developers are still waiting for the first batch of offers. The uncertainty is akin to circling Heathrow while waiting for permission to land.

The winners under Gate 2 are mainly solar projects. Solar farms generate new green electricity and directly contribute to the government’s Clean Power 2030 targets. NESO’s scoring emphasises generating capacity; battery energy storage systems (BESS) have received less capacity because they do not work in a way that immediately adds new megawatts to our green generation goals. BESS developers are therefore struggling to secure connections, and this is despite the fact that they play a vital role in the future of clean power.

On the flipside, small developers and community projects are at serious risk of being squeezed out, which may be due to an inability to compete at scale. Large developers can and are submitting a dozen projects, with the expectation that the probability means that at least some will secure capacity, while smaller companies may have only one or two opportunities. Deep pockets also enable bigger players to meet readiness criteria, such as funding transformer purchases or securing land rights, before receiving an offer.

Gate 2 codifies a survival‑of‑the‑fittest ethos. This was not an unintended consequence but a design choice: the reform prioritises projects that align with clean‑power goals and can move quickly, even if that privileges well‑capitalised firms.

Why fairness matters and what could change

Allowing only the largest players to connect at pace risks entrenching geographic and socio‑economic disparities. It’s a similar scenario to Britain’s rail network or initial broadband rollout: investment flows to densely populated areas while less affluent regions are left behind.

If only large developers stand to benefit, remote communities risk being left without the renewable energy they need to build a sustainable future. For the reform to be effective, Ofgem should ensure greater transparency in how projects are scored; introduce grace periods so legitimate legacy projects are not unfairly penalised; establish an independent ombudsman to handle appeals; and maintain investment parity. This would help ensure that network reinforcement keeps pace with queue reform. Importantly, Ofgem should also consider ring-fencing capacity for small-scale or experimental projects to encourage innovation.

NESO and Ofgem should focus on quick wins rather than waiting for a perfect, all‑encompassing solution. One opportunity is to clarify the definition of a transmission asset. Currently, generation developers can self‑build networks and connect directly to the transmission system, but demand users (such as data centres) cannot. Allowing both supply and demand to be treated as transmission assets would let demand‑side players self‑build connections and bring independent network operators (IDNOs) into the transmission sector. The distribution network already has a competitive IDNO model: up to 80% of new connections in 2024 were adopted by IDNOs, according to the Independent Networks Association (INA).

One question we ask is: why cannot similar competition be introduced in the transmission network, unlocking queues and accelerating investment?

A “no‑regret action” would be to open the connections market to more competition. Today only transmission network operators can build and own high‑voltage assets. Creating an independent transmission license, analogous to the distribution IDNO model, would allow private companies to build and operate segments of the transmission network. This could reduce reliance on incumbent operators and ease bottlenecks.

Within all of this, NESO, Ofgem, industry, and the Department for Energy Security & Net Zero must collaborate closely. When these bodies fail to align and work as one, reforms stall.

A just transition is within reach

Gate 2 reforms are a significant step, but it is not, by far, a cure‑all. The stakes are high for everyone here. Developers have committed billions of pounds on projects that hinge on receiving firm connection dates in a timely manner. Delayed offers, also undermine investor confidence and push up costs. If the reforms benefit the large players only, we could risk and repeat the mistakes from other sectors, where rural areas existed without broadband or adequate rail lines for example, leaving communities left on the wrong side of the net zero transition.

A fair energy transition requires more than a reformed queue. It demands investment parity, innovation space, and feedback loops. It means recognising that storage and demand response are as important as generation. It requires ring‑fencing room for smaller developers and community projects. Above all, it requires NESO, Ofgem and government to provide clear, timely offers so that capital can flow, and projects can move from planning to construction.

Gate 2 has begun the process of rewiring Britain’s energy future. It could become a catalyst for an inclusive, net zero economy or, potentially, a bottleneck that entrenches inequity. The answer lies in how fairly and efficiently it is implemented.